Canada

Canadian Property Bubble Nears Systemic Failure, And Not Even A Big Crash Can Fix It

Canadian real estate markets have become such a large bubble, even a crash can’t fix prices. That’s what the Globe’s Rob Carrick argued earlier this week. The personal finance expert says it’s now too late for young adults in Toronto and Vancouver. Policy failures made markets so inefficient over the past few years, ownership is now an unrealistic dream for them. As a result, the trend of flight to small towns might be a more permanent shift, even after the pandemic.

Crunching the numbers, Rob might be right. Even an earth shattering 30% crash can’t make these cities affordable for most. Over just a few years, these cities are now unrealistic options if prices rise, stay the same, or even crash. Here’s the numbers on how unrealistic the market has become for young adults.

About Today’s Numbers 

Just a quick primer on the assumptions and numbers used. We used local board prices for the typical home, a.k.a. benchmark. We’re then going to look at how long it takes to save a down payment, as well as the income to cover a mortgage. If you want a detached home, it would be easier to build a time machine than save the down payment in either Toronto or Vancouver. 

For the income used in these calculations, we used the median income for people aged 25 to 35 years old. We assume a dual income household, saving 10% of their gross income. Incomes are also assumed to have grown in real terms, which isn’t the case for Toronto. Yes, I’m being generous by using lower home prices, and higher incomes. You know me, ever the optimist.

For the mortgage nerds, there’s also a few assumptions needed that are generous. The amortization period used is 25 years, with monthly payments. We’re also assuming the payment is a max of 30% of your income, but it’s only the mortgage cost. It excludes taxes, maintenance, and insurance — which need to be less than 5% of the income, or incomes need to be higher. 

The mortgage rate is also assumed to be 2%, which is what you’d find today, but far from normal. For mortgages to stay this low, Canada would perpetually need to be in recession. If that happens, homeownership is probably one of the smaller issues.

One last point, we’re looking at the Greater Regions for Vancouver and Toronto. If you want to live in the city, you’ll likely need to pay much more. We’ll also look at the next real estate market, where young people are currently fleeing. These markets are already seeing massive price growth though.

It Would Take Up To 26 Years To Save A Down Payment Today

First, let’s start with down payments in Gangster’s paradise — Greater Vancouver. At February’s prices, the GVA would require 307 months of savings (26 years) to save the minimum. If you plan to flee to Fraser Valley, you’re looking at 128 months of savings (11 years). For those not from Vancouver, Fraser Valley is the adjacent real estate board to the GVA. It’s basically a suburb of a suburb.

Greater Toronto real estate seems affordable in contrast, but really isn’t. The typical down payment requires 135 months of saving (11 years) for the minimum. Fleeing to Hamilton cuts it down to 105 months of savings (9 years) for the minimum. You’re going to have to stop crying, because we’ve got a lot of numbers to go through. 

Note to American readers: Canadians say Toronto is like-NYC, but it’s a generous comparison. For context, the city’s density is similar to Philly. The Greater region’s GDP is about the size of Detroit. Greater NYC’s GDP is similar in size to all of Canada. It’s not quite the same, and you’re more likely to be able to buy a place you can afford in NYC than Toronto, on the same income.

How Long Does It Take To Save A Down Payment If Prices Fall 10%?

The real estate industry and government find anything more than a 10% correction to be absurd. That’s less than a year of prices rolling back. GVA real estate prices falling 10% drops the minimum down payment to 136 months of savings (11 years). In Fraser Valley, it’s about 108 months of savings (9 years).

You might have noticed Greater Vancouver’s number dropped significantly. That’s because below $1,000,000, the down payment threshold drops significantly. Allowing smaller down payment on higher prices sounds like the solution then, right? Unfortunately that’s a credit expansion, and is most likely to facilitate higher prices as a result.

In Greater Toronto, it still takes at least a decade to save. A 10% drop in a typical home price would lead to needing 114 months of savings (10 years). In Hamilton it would take about 87 months of savings (7 years). Getting better to live an hour (without traffic) away from Toronto. 

How Long Does It Take To Save A Down Payment If Prices Fall 30%?

Greater Vancouver real estate prices start to look reasonable with a 30% drop. Only by contrast though. A typical home would take 90 months of savings (8 years) to save the minimum down payment. In Fraser Valley it would take about 68 months of savings (6 years). Keep in mind, this is still just for a typical home. A 30% price drop for detached homes would still need 320 months of savings (26 years) for the minimum down payment.  

Months For A Downpayment On Canadian Real Estate

The number of months it would take a dual income household, aged 25 to 35, to save for a downpayment.
Source: CREA, Better Dwelling.

Greater Toronto real estate prices at 30% also look somewhat affordable. The GTA would require 74 months of savings (6 years) for the minimum down payment. In Hamilton it’s a much more reasonable 52 month of savings (4 years). A detached Greater Toronto home would require 99 months of savings (8 years) for the minimum down.

If prices crash this much, the down payment time improves — but there’s other things to consider. The number of months assumes wages rise in line with real estate prices. Canada’s economy is so heavily concentrated in real estate though, it would be tough to see wages rise near-term.

When New York City saw real prices falling ~26 from 2006 to 2012, it took a lot of the economy with it. By 2017, the population had peaked, after prices only half recovered. They’re finally above the 2006 peak, but it was a long time. Prices didn’t move for almost 15 years, and they’re now rising against a falling population. That usually doesn’t last super long.

Household Incomes Still Need To Be At Least $128,100 To Carry The Mortgage

Oh, crap. Did I forget to mention the mortgage payments aren’t possible for people making those wages? In Vancouver, you currently need to earn at least $147,600 to make the payments on a typical home in February 2020. Over in Fraser Valley, you can get away with $143,700 per year. That’s 44% and 40% higher than the current median household income, respectively.

Greater Toronto real estate also requires much bigger salaries to carry the mortgages. The payments on a typical GTA home needs a minimum salary of $148,570. In Hamilton, it’s estimated at $128,100 at minimum. The minimum income is 45% and 25% higher than the current estimated household income, respectively. 

Incomes Still Need To Rise If Prices Crash 30%

Greater Vancouver real estate payments still can’t be covered by a median salary, even with a 30% crash. Covering the mortgage payments on a typical GVA home works out to a  $118,200 minimum income. If you flee to the burbs in Fraser Valley, that income is a $103,100 household minimum. The minimum GVA income is 15% higher, and Fraser Valley is 1% than the current median income. If things crash and stay at that level, Fraser Valley is affordable. So congrats, BoC. You’d nail one major employment region. 

Canadian Minimum Household Income

The minimum income required to carry a mortgage on a typical home, at current levels, compared to a 30% real estate price drop.
Source: CREA, Better Dwelling.

Greater Toronto real estate would be almost affordable at this level to carry. Households require $106,500 of household income to cover the minimum payments. In Hamilton, the current minimum income would cover the payments. Even though mortgage payments would be affordable, you have to consider employment.

Real estate prices absolutely cratering makes prices affordable, but there’s the economy. For the above wages to work, they need to move in line with house prices. However, a crash like that would see a weak employment market, making it tricky to not see your own wages fall.

Canada’s addiction to real estate also led to a buildup of risk never before seen. The country is almost twice as dependent on real estate as the US was before the Great Recession. If its two major markets suffered a major drop, the adjustment of capital allocation is likely to take longer. The environment would also force entrepreneurs to seek out more attractive regions. With those entrepreneurs, go the jobs.

Preserving real estate prices is also likely to have a similar effect at this point. Let’s assume the best outcome, where prices move smoothly with income from here. In the GVA, today’s 25 year old couple would be 51 by the time they have a down payment. If they were ambitious and wanted a teardown detached, they would be 63 by the time they saved a down payment. Not exactly a reality most people would enjoy. In fact, it could be a worse scenario than the one many of their parents immigrated to avoid.

Usually people are smart enough to figure out there’s better opportunities for them. That’s why the flight to smaller cities and small towns is likely to persist for much longer. Canada saved banks from systemic risk during the Great Recession, by transferring systemic risk to its major cities.

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65 Comments

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  • Trader Jim 2 weeks ago

    I remember when Montreal was Canada’s global city. I explain this to clients by telling them to think about the age pyramid. They understand it. They understand we need more immigrants to float their taxes as well.

    Now what happens when the top transfers lower? Yes, some money will be downward distributed, but the size of the pyramid isn’t large enough to absorb it at increasingly higher prices.

    Even if you pull in more immigrants, you over run price growth risk for rentals before you create enough wealth for the youngest people. It doesn’t matter if interest rates go to minus twelve, you’re going to want diversification from just a primary residence.

    • Mortgage Guy 2 weeks ago

      Generational shift. Happens once every 20-30 years. People will be back, it’ll just be a different city.

      I think it’s important for people to be really honest about the situation. A 30% drop is unlikely. Even if it is, does you want to 50 when you plunk down for that first home?

      I also see a lot of families that should be very rich, and take home $200k+/year. They’re buying tiny condos. This is the kind of housing you used to buy when you were low income. Now its’ all they can afford.

      • Steve Rock 1 week ago

        Who thinks that it is a right to live in the most expensive cities in this country. Perhaps other cities need young workers as well.

        I can’t afford to live in Toronto. So I don’t.
        I can’t afford to live in Vancouver. So I don’t.
        I was able to afford to live in a suburb of Vancouver, So I did. Now the property is worth 2x. Inflows from the city to suburbs and then the reverse in due time.

        T

        • One Percenter 1 week ago

          I love the boomer mindset.

          “Real estate prices are worth it because we have great schools and restaurants. ”

          “The people that teach at schools and restaurants don’t have a right to be here! They should move! ”

          I’m also guessing you don’t understand the person you’re replying to is clearly referencing tax and local business support. The $5 early bird dinners you buy once a week isn’t going to keep the whole city floating.

          • Group Action 1 week ago

            Drive out the innovative and the productive, in addition to all those workers that provide essential services. Let them see what they are left with. We should all unite and make a plan in unison to start somewhere new. Now that would be an amazing construct and turn of events. Can we do this without realtors!

            I think we need a plan

        • Nar Wahl 1 week ago

          Did you read the article? Greater Toronto Area and Greater Vancouver Area (the suburbs surrounding the metropolis’) are discussed. I suggest you read it again to understand what is being said. People are being priced out of Guelph right now…

    • HotRodHonno 1 week ago

      I have been reading that $48bln has flowed into Canada from HK. All these people abandoning HK will need to live somewhere, whether they rent or buy. I welcome people fleeing oppression whether they’re rich or poor – so long as they love and respect Canada’s traditions and are damn sure they’ll help make Canada more free and independent – respecting and protecting our rights and fighting anyone who tries to steal our rights freedoms from us. The only thing to do to solve he housing crisis is to build more and let people with money buy or rent them. Revitalize old homes and apartments for the poor but only if they’re willing to help do the work, not just get it for free so that poverty pimps get rich by using government to steal from homeowners as they do now.

    • Sam 1 week ago

      Time to move out of Canada to some other country! Too much hype in canada and less to deliver in the reality!!!

  • Thomas 2 weeks ago

    Moved to Kingston when the pandemic first broke out. Smartest decision I ever did, and not just because prices are rising here. It was just a constant struggle to think about buying a condo, then hoping it goes up and then giving 6% to Realtors and fees, then wondering if it goes up.

    I don’t even care about the value of my home. It’s just a relief to buy something and not be house poor.

    • Coop 2 weeks ago

      Can confirm. Moved to Hamilton 2 years ago. Thought I’d hate it, but one of the best decisions I’ve ever made. The pandemic sucks, but it’s nice to be in a place where small businesses aren’t shutting every day, and new ones are popping up. A lot of stuff happening here.

  • Holton 2 weeks ago

    The biggest mistake the government made was propping up real estate during the pandemic. If the worst economic and health crisis didn’t drop real estate prices what will? Sub sequent printing of fake money by all the major economies of the world. At this point even rational people who were waiting on the side lines jumped it. And it makes sense.

    If they printed all that money it makes sense much of it will end up in real estate in the coming years. What we can do is do what Asia is doing. Hold home prices steady and allow inflation to go up 10 year. That way 10 yrs down the road home prices will be less in real terms compare to everything else.

  • Globtrotter 2 weeks ago

    Congratulations, TO and Van are now World-Class cities. Enjoy!

  • SH 2 weeks ago

    And the best part is that prudent responsible savers get to pay for the fallout while the overleveraged parasites get bailed out.

  • Oncoming Onslaught 2 weeks ago

    The simple reality is the last 20 years have painted a clear signal to those who have studied here and hoped to thrive: it’s not likely to happen.

    You have upper-middle-class professionals here wondering if they can afford a f*king condominium shoebox. Yes, I know that’s the norm in Hong Kong, but it’s a striking difference from the egalitarian, progressive ethos of that westerners have been taught to believe that their future is just going to keep getting better if they just worked hard and followed the rules.

    The sheer amount of wealth from the benefactors of the last 40 years of globalization (chinese elite, emirati oligarchs, russian kleptocrats) is enough to own just about every piece of real estate your country produces multiple times over at prices that your populace simply cannot compete with. They will be the underclass soon if they aren’t already.

    Then you add in credit creation and a cultural addiction to real estate, and you have a situation where the government has no choice but to prop up this ballooning sector to a higher % of GDP. To hell with GDP per capita or other material advances in living standards. What matters now is supporting the market because they simply do not know what else to do. The factory jobs left ages ago, the technology also left, and the innovation left. The productivity of the country is crap. All that remains is the FIRE economy and becoming real estate agents, boys. Also becoming UBER drivers and low-productivity service sector workers.

    This country in particular is destined to forever be a branch plant for the American companies and a piggy bank for overseas wealth.

    If you are a young person, the writing is on the wall. You better find happiness in things that aren’t material wealth. Whether this is a bubble isn’t even relevant anymore. Let’s say the prices drop by 50%. Great. It’ll take a generation of dedicated policy to even get back to an optimistic future where the country produces “quality” jobs. We all know that’s not happening. Not to mention the issues of the Boomers retirement plans.

    The West is Finished. Live it up boys it’s the roaring 20s. Join the exuberance in the equity/crypto/stock markets or get left behind I guess?

    • Paulfrenchfries 2 weeks ago

      Brilliantly well said. The straw that breaks the camels back here I say is we have less to offer than we did before I don’t see that immigrating to Canada is the no-brainer it once was for the investor classes abroad. I believe for five years or so this whole dynamic goes into reverse. If you are a recent immigrant please share your perspective here with me and let me know if I am wrong. If you are smart well educated have $500k to invest is it a no brainer that GTA is where you ultimately want to be?

      • GTA Landlord 2 weeks ago

        Rental yields are a lot better around the country. Toronto was great 5 years ago, but now prices have increased so much, there’s few projects to jump into. If you’re looking for cashflow, Toronto and Vancouver aren’t it. If you’re looking to speculate, sure.

    • Holton 2 weeks ago

      You are correct, they had a chance during the pandemic to let real estate prices fall and cool down the market. Instead the government propped up the economy, they should have let prices fall and print money AFTER the vaccine are in because they need to go into lockdown anyways.

      But I think the only rational way out of this is to hold real estate price increases to where its lower than inflation for prolonged period of time. Or in other words allow inflation to go higher for 10 years. That way the price of home will be less relative to all other goods in real terms.

    • Steve Rock 1 week ago

      I’m sorry but Doctors that make 300k+ per year having difficulty finding a property and living in shoe boxes is hyperbole. The whole country needs doctors and it’s guaranteed income.

      I have completed many mortgages for doctors and they buy houses 1.2+m no problem. If you cant save a down payment with that cash flow you have other problems.

    • Eli 1 week ago

      nailed it

    • Disillusioned Immigrant 1 week ago

      As a recent immigrant to Canada, dreaming along the lines you mention, I agree that it is a major failure. It is disheartening to see this especially in Canada — (supposedly) the symbol of all the cherished values of the West. What is Ottawa doing about this? It seems all they’re interested in is getting in even more immigrants’ taxes to somehow keep the fIRE (I don’t see much finance in Canada; lots of insurance and rent-seeking) economy afloat.

      I also agree with the “branch plant for the American companies” part. It is discouraging to see such mindless dependence on the US. It really does seem Canadians are happy to be dependent, happy to be complacent, happy to be decadent.

    • John Cosstick 1 week ago

      Interesting comment. If prices in any country or city drop 40% and place homeowners in negative equity, say, 20% plus the question will arise whether they are entitled to a fixed-rate housing loan when they are in negative equity. This is especially critical if they are currently on an Adjustable Rate Mortgage (ARM) (variable interest rate mortgage). According to my calculations that if a borrower with a mortgage of $500,000 over 30 year term (principal and interest) with a record low interest ARM, but in negative equity managed to switch to a fixed rate and dropped the average interest rate of the loan over the term by 2% the savings would likely be in excess of $200,000. This would make a big difference to the repayment of negative equity if there is a long term substantial correction. Consumers Associations and finance journalists need to be across this in my opinion and start campaigning for clarity on the entitlements of borrowers in negative equity. What do other readers think?

      • Keith 1 week ago

        While this may be true, what does 1.2m get you in Toronto?

        I know a lawyer and a corporate exec who have a very decent combined income and they recently left Toronto due to prices.

        One would think a city like Toronto would want to keep people like this, instead of having a brain drain and spreading out to other places.

  • Kevin 2 weeks ago

    30% crash? these people of out of touch, the market will go up 30% if the government does not stop printing money..

  • PJFrenchfries 2 weeks ago

    Do like me. I rent a 4 bedroom semi in GTA for $2,150. Space my money and invest it. I managed to buy multiple homes in distant locations for very low cost earning me rent to cover my Toronto living costs. Yes GTA is a ridiculous bubble …. people need to use their head and think outside the box. It’s awkward at first but homeownership is overrated. The key is living comfortably and being financially secure. Our over leveraged GTA homeowner friends are not as comfortable.

    • WEXIT 2 weeks ago

      Good for you, I think the way you have done is the route to go, if you want some RE in your portfolio.

    • JasbonBourne 1 week ago

      And how long ago did you find a 4-bedroom semi for $2150?

      • The Truth Shall Set You Free 1 week ago

        Actually right now in Toronto you can find extremely affordable rent on account that there are a lot of people who bought just for AIRBNB. They can only stay afloat so long before they need to send an SOS for help. As an example, you can now rent a 2 bedroom plus den which were once going for close to 3,000 for around 2,000 a month.

  • Ashley 2 weeks ago

    All the CERB/CEWS/small business loans/fraudulent claims have no where to go but housing, the safest asset backed by govt. guarantee. There is no reason to build an industry when one can get 30%, with leverage 200% safe return every year. Why convince a bank to lend you a money to start a business when bank is standing at your door to lend a mortgage as large as you want.

    • khawaja adil 1 week ago

      100% agreed.
      Hardly anybody who received govt money ( CEBA loans ) use to pay bills of the business facing financial stress. Most of the money used to pay as down payment for purchase of property or pay mortgage. CRA should carry out the 100% audit of the use of CEBA loans before waving of $ 20, 000 blindly.

      Anyway, Market can naturally crash when such properties purchased on CEBA loans/CERB/CRB etc will be unable to sustain/hold for a long.

    • Shawn 1 week ago

      I assure you no one is being approved for a mortgage based on these programs. The banks aren’t just handing out money, it is going to qualified individuals, under more scrutiny than ever. Those buying houses simply are able to afford them. Buyers have professional incomes UNAFFECTED by the pandemic. Cashiers and janitors aren’t ones buying $mil to $2mil homes, professionals and business owners are. There is NO shortage of qualified buyers., I repeat there is no shortage of qualified buyers.

  • Dorian 2 weeks ago

    I’m a fairly recent immigrant. I planned to buy when I moved here but when I saw the market go up 20% in one year, I decided to stay on the sidelines. I used to regret not buying, but not anymore. I’ve seen a few bubbles in my time, and even if this one inflates indefinitely, I don’t want to be in a market that is so obviously overvalued. I like Toronto – it’s a vibrant, diverse and socially liberal city – but if rents go back to pre-pandemic levels, then I’ll have to reconsider my attachment to the city. What people trapped in a bubble don’t seem to realize is that there is a world outside Toronto.

  • IthoughtWeWereSmarter 2 weeks ago

    And you have the CREA spinning the numbers to their advantage. The inevitable meltdown that is coming is going to be painful. I am so embarrassed to say I’m Canadian now. We’re a bunch of slimy speculators looking for quick cash reward. That is the new CANADA!!! Our friends to the south are saints compared to us!!!!

  • Little Birdie 2 weeks ago

    The article states: “ However, a crash like that would see a weak employment market, making it tricky to not see your own wages fall.”

    Ummm… we currently have a weak employment market. The only reason it hasn’t hit real estate is due to government intervention – QE, CERB, deferrals, low rates, etc. What’s going to happen when that party stops?

    • chris 1 week ago

      It won’t stop. Our government is too scared to inflict financial pain, which is what has been required to normalize the economy. Maybe they know something i don’t and they can inflate us out of this situation, but I have my doubts.

    • The Truth Shall Set You Free 1 week ago

      You forgot to mention the junk bond buying by the BoC to the tune of 4 billion a week (208 billion a year). This is the single most reason why things haven’t collapsed yet and why home prices have been pumped ever higher. The minute they stop this and banks have no one to offload their trash to they will tighten up lending in a big way. Add to this the fact that most of the banks hold treasury bonds which now have their yields rising and you have a disaster. BoC wants to buy treasury bonds to tamp down yields as these control the mortgage rates but the banks see yields rising so they reject the offer by the BoC to buy their bonds on account that the longer they hold them the more valuable they’ll be. Also as these rates rise so too do their lending rates meaning they make money on either side. It’s all legal…well it shouldn’t be but I assume it is as it’s fact in what is happening right now.

  • Bob Walter 2 weeks ago

    As a Millenial, you will never own anything, and you will like it.

    • Grt 1 week ago

      Great Reset. People are starting to wake up to this. It’s real.

  • Rand Passmore 1 week ago

    The skilled and educated immigrants that Canada wants to attract will no longer want to come here.They can get similar pay in a country with more affordable homes and better weather! Are we about to see a new “brain drain” that will jeopardize our economic future?

    • Ashley 1 week ago

      That has unfortunately already started, 4 folks (skilled and educated) I know moved back to their home countries. Came 3 yrs ago and stuck with high cost of living decided to move back as they had left good jobs back home thinking they’ll get better life here.

    • lopez 1 week ago

      Rand, Canada is much more than TO or Van. It is really not too bad outside those metros and satellite communities. Why would anyone move to TO anyway???? The wages are not enough to survive, it is crowded and rather boring compared to other international destinations of similar size…not to mention the weather.

  • straw walker 1 week ago

    The rise of the asset class, is a direct result of currency inflation
    Western central banks have been debasing their currencies by printing endless amounts and by reducing borrowing requirements to the point that there isn’t any.
    What is the result.
    Rising rates and collapsing currencies.
    Bitcoin appreciation
    Real-estate sky rockets
    Government bonds falling in price. with the yield curve pushing higher
    The final result will be run away inflation and complete loss of buying power of the dollar.

  • Bob 1 week ago

    This article is the definitive example of conflating income and wealth. Tax conversations always center around income levels when talking about the ‘wealthy’. In reality, the two are barely correlated. In Vancouver today, it costs $3,500,000 to live like you’re poor in a teardown house on the west side. There are no local salaries that can afford it.

    Real wealth is accrued in real estate, stocks, private equity, currencies and other financial assets. It is sacrilege to even discuss taxing real wealth. Only home-owning working stiffs pay a wealth tax (aka property taxes), while the real wealth goes untouched.

    Elon Musk could have paid himself a $1 salary this year and paid no tax. Even though his wealth increased by $100,000,000,000.

    • One Percenter 1 week ago

      Every middle class person thinks they carry the tax system, and don’t realize the top ten person of wealth pay 60% of revenues. Homeowners are 70% of the population.

      Middle class homeowners that rant about subsidizing the system don’t even begin to understand how taxation works.

      You know how cities receive subsidies and handouts from the Federal and Provincial governments? That’s because property taxes aren’t sufficient, so top tax bracket payers need to carrying their entitlement.

      The “conflation of income and wealth” is because you don’t understand taxation. Although tbh, it appears you didn’t read the article, because they don’t mention taxation. I’m not surprised you don’t understand how taxation works. You can’t comprehend what you just read.

      • Bob 1 week ago

        Let me make my point more clearly. Nuance is lost on you. This entire article delves into the minutiae of income versus housing affordability. I pointed out that using income as a measure of how ‘rich’ somebody is (the level of house they can afford) is absurd. Income and wealth are barely correlated now – wealth is made via financial assets.

        You made the exact same mistake. The top 10% of income earners pay 60% of taxes. You conflated those 10% with the top 10% of wealth. They are not the same. People who make tens of millions a year in financial asset gains are shielded from tax , as they are not income earners.

        The top 10% of income earners and, to a lesser extent, middle class homeowners absolutely do finance the system. Really wealthy people pay no wealth tax. Homeowners pay a wealth tax on the full amount of their houses (aka property tax) even when they don’t actually own the property in full.

      • SH 1 week ago

        I think what you mean is that 10% of income earners pay 60% of revenues.

        Plenty of wealthy students and housewives in BC with absentee dads/husbands that earn money offshore and funnel in millions to load up on real estate and push out Canadians. These wealthy people pay zero income tax.

      • Louis 1 week ago

        You need a better accountant. I would imagine that the that the top 10 percent know how to avoid paying that much tax. It’s the middle class and working class that get screwed. Majority of middle class and working class are employees and have limited options to reduce their tax burden.

    • Thom 1 week ago

      The article doesn’t conflate income and wealth. It discusses two issues that are required for affordability to be executed.

      The takeaway is you can’t just lower interest rates, because the downpayment is the problem.

      You can’t just crash prices, because maintaining income becomes an issue due to the bad economy that would result.

      Handling this problem back in 2017 would have been painful, but it wouldn’t have required such a big drop. Now it’s spilled out into affordability issues across the country. To prevent the whole country from suffering the same issue, they need to act.

  • Jesus Murphy 1 week ago

    I love this webpage for its always interesting and usually informative content. I will tell you that most on this page are delusional. Toronto/Vancouver are going to stagnate and crash and hover at a price for 15 years.
    The future of real estate is in the reposession of it not in the buying of it. Any of the environmentalists or Liberal zealots on here must realize that in REAL cities like LA/Austin/NYC/CHICAGO/Seattle you can buy homes in all price brackets …. GTA has 21 welfare ghetto condos for sale under 300k….The Greenbelt/Bluebelt and overridding communist provincial/federal overlords have made a wunderbarraum of no jobs and out of sight home prices. A true wonderland is one where homes are steady in price and incomes rise.
    We are now in Canazuela 2001

  • Ping Duong 1 week ago

    Average house price in Canada will increase by at least 28% in 2021.

    CRB will be extended and no one needs to work. Canada is leading the G7.

  • stevem 1 week ago

    Is this Singapore or Monaco? No it is the second biggest country in the world. There are many beautiful places to live in the interior of British Columbia or Nova Scotia that are cheap,we don’t all have to crowd into three cities

  • Despondent 1 week ago

    The article touches on the affordability problem due to the relative difference between income and property prices, but I don’t think it went far enough.

    While property prices have increased substantially over the past 30 years, nominal wages have remained stagnant. The price of a home used to be 2-3x average annual wages in some of these places, now we are seeing them balloon to 15-20x. Rising prices are a problem, yes, but they are compounded by the fact that wages haven’t even kept up with inflation, meaning real income has actually gone down over the same timespan. Meanwhile, our economy has grown, production has grown exponentially over the past 30 years.

    Almost every millenial I know who has bought a home either used an inheritance from grandparents, or a loan from their parents as a down payment.

    This affordability problem extends far beyond housing. It’s a labour problem. It’s a corporate greed problem. If we don’t fix this, the way we live will change forever.

  • JF 1 week ago

    Why do we have these stupid fools like Stevem et al. posting this crap like:
    “We have lots of beautiful places outside of the major cities in Canada to live that are affordable, like Interior BC or Nova Scotia”… Just move. 2nd-biggest city in the world.

    So clueless. Yes, we get it boomer, you retired, are undereducated, and moved somewhere else to live out your final years. Good for you.

    There is a reason housing is cheap in these communities. There are NO DECENT JOBS, unless you are a Doctor, Nurse, or perhaps a Teacher who can work anywhere. PEOPLE GO WHERE THE JOBS ARE!! .

    Top-end, well paying (in relative terms) jobs for EDUCATED professionals in government or consulting are ALWAYS in the major city-centres! I don’t see this changing any time soon. The headquarters of the big industries (Mining companies, O&G – (We live in Canada)) are also in these major centres. You need to live there to meet with these people and work with them. Hence, you have to move for work. You can’t just up&move.. Even with teleworking, we’re not there yet. Human connection is needed, as is the creativity and synergy that comes with that.
    Hence the massive problem we have in Canada.

    • Jad 1 week ago

      Yes very true indeed, it’s kind of a vicious cycle. I’ve been eyeing to move out of the GTA for years, but it is hard to find comparable jobs with comparable pay. I wouldn’t live any more comfortable if my salary is down 20% along with living costs. Not to mention the need to rebuild my entire social network basically.
      Personally this is why I think the US have an advantage over us, there are many more big, relatively affordable cities to choose from than just the handful here in Canada.

  • Korla Plankton 1 week ago

    A population vacating big cities mean further investments in infrastructure will be required, along with a greater environmental footprint. Cities are economically and environmentally more efficient places to live. Geographical sprawl is a common excuse for various services not being available in smaller communities. We can hope that, with the influx of population in these smaller areas it will become economically feasible to provide more of these products and services.

    I also wonder about voting demographics. These foreign millionaires may not be voting but their kids might, and living as they do with their inherited wealth they might be quite out of touch with reality for the ‘rest of us.’ This is the same old problem of the 1% having a disproportionate impact on the lives of everyone else. Nothing new there except it looks like it’s just going to happen to a greater and greater degree.

    Anyway, a whole lot of speculation. All I’m sure about is that things usually don’t turn out just how we expect.

    • Shawn 1 week ago

      I’m sorry to say this but you are very uneducated on this topic.

  • paulfrenchfries 1 week ago

    So True. Well said. I was called to the Bar in Ontario in 1993 during a deep recession. New lawyers were lucky to be paid $45,000 per year back then (if you could find a job). In my second year of full time work I purchased my first home in North York. Rather than buying a nice home for $175,000 at the time a extended myself and bought a triplex for $225,000. I was able to offset my monthly mortgage costs and utility bills from rents received in two of the units that were rented out. My mortgage rate was 6.25% which I was delighted to get at that time. Rates had fallend from over 10% over the preceding few years. I worked very hard to save money to make as many principle repayments on the mortgage as I could because $8,000 + in interest payments was a challenge for me. All in all I found it inspiring I was driven and passionate about working saving and investing. There was no Central Bank Shenanigans – we were suffering from outright deflation in the economy. Fast forward to 2021 it’s been 30 years. Newly minted lawyers in Toronto are having an equally difficult time today to find work – many I hear are taking jobs for free just to “get in”. $45,000 is a well respected pay for a first or second year lawyer. The same triplexes run over $1mil today and with 2% interest rates the carry would be more than double my burden. I don’t see the same opportunities for young people today and quite frankly I am utterly disgusted with what policy makers have done to this country. Canada and the USA have made an unholy bargain betting that globalization would somehow make this world a better place. We have opened wage competition for our Countries to the world unleashing a deflationary collapse on the middle class. We have created a third world dynamic across the planet locking in a third world class structure of the uber rich and increasingly destitute labor class. I have never had socialist ideal I always voted Conservative and Republican (I am a US Citizen also but that’s another story). However I increasingly can see that there is no way out of this mess through attempting to solve capitalism with more capitalism. There is a shift in the winds and a very different future is in store for this country and it’s not going to be more of the same ….

    • SH 1 week ago

      It’s depressing to see that even an apparently intelligent lawyer thinks is at fault.

      No. It’s a LACK of capitalism that is at fault, i.e. the government propping up the real estate market rather allowing it to correct naturally.

      So much of the problem is that so many people simply don’t understand what capitalism. They call for more government intervention which worsens the situation. Abolish the CMHC and the QE bond-rigging, and equalize tax treatment for ALL investment classes, and just watch what happens to valuations.

      • SH 1 week ago

        Er, it’s depressing that an intelligent lawyer thinks CAPITALISM is at fault, meant to type

      • Ashley 1 week ago

        Completely agreed, the tax treatment of real estate investment and income verification are way to loose. When MEDIAN (not mean) household income is $88k and average house is >$1M, this can’t be supported by incomes.
        Building factories and establishing new businesses need hard work and determination. Govt. being incompetent and lazy used real estate to artificially grow GDP and employment %. Even the Canada Infrastructure Bank failed to attract any private investment. This reflects the state of economy but real estate keeps growing.

      • Shawn 1 week ago

        Free market will always be the winner. I too am extremely surprised to read the lawyer comments that I question if they really are a lawyer.

  • Chris 1 week ago

    Let’s just hope all that foreign investment and crime money parasyting our housing markets will all move to bitcoin and leave us alone.

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